Yee Good Fortune Investments Limited v Body Corporate 81340

[2017] NZHC 611

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2014-485-11349 [2017] NZHC 611

IN THE MATTER OF

s 16 of the Judicature Act 1908, s 66 of the

District Courts Act 1947 and Part 7 of the
High Court Rules

BETWEEN

YEE GOOD FORTUNE INVESTMENTS LIMITED

Applicant

AND

BODY CORPORATE 81340

Respondent

Hearing:	23 November 2016
Appearances:	N Dunning for the Applicant A Knowsley for the Respondent
Judgment:	30 March 2017

JUDGMENT OF MALLON J

Introduction

[1]      The applicant owns a unit in “leaky” apartments.  It has refused to pay levies for repairs carried out by the Body Corporate.   The Body Corporate obtained judgment in the Tenancy Tribunal against the applicant.  The applicant appealed to the District Court.  The District Court found in favour of the Body Corporate.  The Body Corporate obtained entry of the District Court judgment in the High Court in order to enforce it through a sale order.

[2]      The applicant seeks that this Court now set aside the judgment (and make consequential orders setting aside or discharging other orders) on the grounds there has been a substantial miscarriage of justice.   The applicant relies on the Court's inherent jurisdiction to seek this relief.  Alternatively the applicant seeks an order

staying execution of the judgment.

YEE GOOD FORTUNE INVESTMENTS LIMITED v BODY CORPORATE 81340 [2017] NZHC 611 [30

March 2017]

[3]      The substantial miscarriage of justice is said to have occurred because the Body Corporate did not have the power to levy the applicant.  The applicant says the Tenancy  Tribunal  and  the  District  Court  were  wrong  to  find  otherwise.    The applicant says the absence of any power was recognised in a later decision of the District Court involving another unit holder in the same apartment.  An application under s 74 of the Unit Titles Act 2010 (the 2010 Act) is necessary to resolve the matter and such an application has been filed.  The applicant says it would be unjust to allow the Body Corporate to enforce a power of sale for unlawful levies prior to resolution of the s 74 application.

[4]      The respondent submits there is no substantial miscarriage of justice.   The District Court found the levies relating to the applicant to be lawful.  There was no appeal from that decision.   The s 74 application concerns allocation of the costs between the unit holders, not the power to levy.  If the applicant has paid too much, then it will be refunded the difference between its allocation and the levies.

Background

[5]      The apartments were constructed in the 1990s.  They suffered from leaks and have required  extensive remedial  work  to  be  undertaken.   The Body Corporate obtained expert reports.   On the basis of those reports, at a meeting of the Body Corporate on 16 July 2011 it resolved to spend $1,466,000 to carry out repairs to the curtain wall, and the decks and balconies.   It also resolved that the costs of the repairs would be paid by the unit holders by way of a special levy calculated in accordance with their unit entitlements.   The minutes record the resolutions were passed unanimously.   They do not record the applicant as being present or as submitting a proxy.

[6]      The remedial works commenced in accordance with the resolutions.   The applicant was invoiced for payment of its share of the special levies.  It refused to pay the invoices.  The Body Corporate brought a claim in the Tenancy Tribunal.  The amount owing under the invoices was almost $32,000 plus interest.  The applicant brought a cross application raising a number of matters in defence of its position.

First decision of the Tribunal

[7]      The adjudicator gave a comprehensive reserved judgment on 6 March 2013.1

For the reasons he explained, the validity of the special levies was to be determined under the Unit Titles Act 1972 (the 1972 Act).  The starting point under the 1972 Act was that the Body Corporate’s power to impose levies on unit holders, in proportion to their unit entitlement, was limited to the cost of repairs to common property, and did not  include repairs  to  individual  units.   Additionally a body corporate may assume  responsibility  for  repairs  and  maintenance  of  items  of  unit  property providing they fairly can be seen as incidental to the duty to maintain and repair common property.

[8]      In this case the levies were for repairs to the curtain wall (common property) and decks.  The decks included individual decks attached to each of the units and large decks on the podium.   These large decks are part of the two units on the podium level, and act as the roof for the rest of the building.  The expert evidence, obtained by the Body Corporate, was that the surface area of those two large decks was the responsibility of the owners of those units.  However, the outside faces of the decks were part of the common property and therefore the responsibility of the Body Corporate.  The unit owners were responsible for the decks, balconies, railings and balustrades of the decks attached to each of their units but the Body Corporate was responsible for the outside faces of the balconies as they were part of the common property.

[9]      The   adjudicator   found   that   the   Body   Corporate   could   not   assume responsibility to repair and maintain the podium decks, as it had purported to do.  No evidence was adduced to suggest it could not be determined which repairs related to common property and which related to the individual units.   The leaks from the podium did not affect the applicant’s unit.  The decision to impose the special levy of

$1,466,000 was ultra vires because it included expenditure to be incurred on the decks on the podium.  The applicant had no obligation to pay the levy to the extent it related to repairs to the decks on the podium.   Because the Body Corporate had

advanced its case on the basis the applicant’s share of the special levies as a whole were payable, and it had not apportioned it as between the common property and the individually owned decks and balconies, the Body Corporate’s application was dismissed.

[10]     The adjudicator also rejected the arguments advanced by the applicant.   In particular, the applicant had not shown the Body Corporate’s decision to repair rather than replace the curtain wall was unfair or inequitable.  The applicant had not shown how the 2010 Act could assist with its argument that the Body Corporate had ignored the advice of experts it had engaged.  The applicant had not shown it was appropriate to make any order in relation to documents it sought from the Body Corporate – it merely had to ask the Body Corporate for documents which were available.

Events between the first and second Tribunal decisions

[11]     Ms Yee applied for a rehearing in the Tenancy Tribunal under s 105(1) of the

Residential Tenancies Act 1986.  The same adjudicator dismissed this application.2

The Body Corporate initially sought to appeal the Tribunal’s decision to the District Court.  However it then decided to apportion the special levy in accordance with the adjudicator’s decision. The appeal was put in abeyance.

[12]     On 29 June 2013 the Body Corporate held an extraordinary general meeting. The applicant is not recorded in the minutes as having attended.  An expert report allocating the repair costs as between common property and property owned by individual unit holders was tabled for the meeting’s consideration.   The meeting resolved as follows:

IT WAS RESOLVED “That the Special Levies to pay for the deferred maintenance contract in the total sum of $1,883,004 to date be allocated as shown in the column marked D in the Lavin/Levie schedule in principle, on the basis that Maltbys re-check all numbers and provided columns showing both private and common costs on each unit and that their full report be provided to owners” AND IT WAS FURTHER RESOLVED “That the payment as common property for 50% of Apartment 23 deck is to represent the damage done to the deck by the common property abseil anchors” AND IT WAS FURTHER RESOLVED “That all work on the ground floor areas will be treated similarly”.  Carried as a special resolution by all owners and

by those eligible.  Of the 3 dissenting votes, 2 were in eligible: apartments 1 and 6.  The Bosch postal vote did not express a view on this resolution.

[13]     Unit six is the applicant’s unit. The expert report allocated the $52,441 levied against unit six as comprising $35,490 for repairs to common property and $16,951 for repairs to individually owned property.

[14]     On 5 July 2013 Maltbys provided a letter making some amendments to its report following the 29 June 2013 meeting.  I am unclear whether these amendments altered anything of significance in so far as the applicant is concerned.

[15]     It is apparent from a later document that the $1,883,004 sum referred to in the

29 June 2013 resolution included a sum of $1,478,702 already incurred on repairs. Most of this sum had been levied, pursuant to the special levy resolution in 2011, in three instalments: October 2011, February 2012 and January 2013.  The balance was anticipated further costs to 31 March 2014.

[16]     The applicant remained unwilling to pay the levies.   The Body Corporate wrote to the Tenancy Tribunal on 27 August 2013 requesting that its claims for collection of the unpaid levies against the plaintiff and another unit owner be heard by the same adjudicator.  The letter referred to the Body Corporate having previously lost its claims against the unit owners.  It also advised:

At an EGM on 29 June 2013 owners agreed to alter our allocation of costs to unit entitlements on common property and actual costs to specific owners for work on their property.  At the EGM both parties spoke in favour of the new allocation method.

These two  owners  still  refuse to,  or cannot,  pay their levies  so  we  are applying again for relief.

In the case of Yee we have only been able to claim the maximum allowed for the  Tenancy  Tribunal,  that  is,  $50,000.    However,  interest  continues  to accrue and we will be asking for this extra amount between now and the decision.

The second Tribunal hearing

[17]     The adjudicator, the same adjudicator as that at the first hearing, gave his decision on 23 December 2013.3   He noted the history of the matter.  He referred to the Body Corporate having unanimously agreed at a meeting after 5 July 2013 to accept the Maltbys’ report, pursuant to which:

(a)      the amount of the levy payable for the decks on the podium was calculated and apportioned separately to the two unit holders who owned those decks;

(b)the cost of repairs to the decks on the first floor was calculated and apportioned separately to the unit owners who owned those decks; and

(c)      the other parts of the common property were treated together and the cost of repairs apportioned on the basis of the remaining owners’ unit entitlements.

[18]     The adjudicator also noted the claim against the applicant was for in excess of $50,000 but that the Body Corporate had abandoned its claim for the excess.  This was permitted by s 171(7) of the 2010 Act.

[19]     The adjudicator rejected the plaintiff’s contention that the decision to accept the Maltbys’ recommendation was not unanimous.   The decision was unanimous under the Act, because there is no requirement that all unit owners attend meetings and vote and the plaintiff was prohibited from voting under s 96(3) of the 2010 Act. The  adjudicator  did  not  see  any merit  in  the  applicant’s  criticisms  of  Maltbys’ calculations and approach, nor in the Body Corporate’s approach based on Maltbys’ report.  He accordingly ordered the plaintiff to pay the $50,000 claimed.

Decision of the District Court

[20]     The applicant appealed to the District Court.  It contended that if the original resolution imposed in the levy was ultra vires, then simply recalculating the levy is not a basis for a further valid resolution.  The applicant argued that the validity of the levy was not properly assessed at the hearing, with the adjudicator treating the new application as a continuation of the earlier hearing but with the levy recalculated. The applicant also disputed the jurisdiction of the Tenancy Tribunal.

[21]     The District Court delivered its decision on 13 July 2014.  On the jurisdiction issue, the District Court concluded the Tribunal had jurisdiction because the claimant could waive the amount of the claim over $50,000 under s 171(7) of the 2010 Act, and the validity of the levy was not a matter that goes to jurisdiction.

[22]     On the other issues, the Court concluded the Tribunal was correct to find in favour of the Body Corporate.  The curtain walls were common property and the Body Corporate proceeded appropriately to determine the levies for this.   The decks were not common property but could be regarded as incidental to the work on the common property (as the damage was found as part of the repair work on the common property) and in any event are a building element in respect of which the Body Corporate is expressly authorised to recover the costs of repair.   There was no evidence before the Tribunal that the levies were anything other than an accurate and fair representation of the appellant's share of the costs.

Later District Court decision

[23]     A dispute between the Body Corporate and another unit holder, Ms Newland, subsequently came to the District Court.4    The Body Corporate brought summary proceedings against Ms Newland seeking judgment of $117,757.13 for unpaid levies. This comprised amounts owing for long-term maintenance funds (an initial long term maintenance fund and a further long-term maintenance fund) and for ordinary levies.

[24]     The District Court delivered its decision on 12 February 2016.   The Judge considered Ms Newland had no defence to the amount owing for ordinary levies. The Body Corporate had established the resolutions imposing these levies  were properly made and the expenses against the operating account were within s 115 of the 2010 Act.   It did not matter that some of the costs were to remunerate the Chairman for overseeing the remediation work.  They were still expenses relating to management and governance of the development, and hence within s 115.

[25]     However the Judge considered Ms Newland had raised an arguable defence to the levies for the long-term maintenance funds.   The funds were to pay for remediation work which was expected to cost, in the end, in excess of $2 million. Much  of  the  work  had  already  been  carried  out  and  pre-dated  the  resolutions imposing the levies.  Long-term maintenance funds under s 116 of the 2010 Act were for the costs of anticipated future maintenance so that the burden would not suddenly fall on the owners at some future time.  They were not to gather funds to pay for already identified defects of the nature and scale confronting the Body Corporate in this case.   The Judge considered the proper procedure to pay for the remediation works was by way of an application to the High Court to approve a scheme under s 74 of the 2010 Act.  He understood a s 74 application was already underway.

High Court steps

[26]     The  judgment  of  the  District  Court  was  entered  in  the  High  Court  on

31 October 2014.  A request for issue of a sale order was filed on the same date.  A

charging order was made on 27 May 2015.  An order for examination was made on

18 March 2016.  The Body Corporate applied for an order to settle a scheme under s 74 of the 2010 Act on 8 April 2016.  It is currently at the interlocutory stage.  The applicant’s present application to set aside the judgment and other orders or alternatively staying proceedings was filed on 22 September 2016.

Decision

[27]     The  applicant’s  argument  as  I  understand  it  is  as  follows.    Under  the legislation the Body Corporate could not levy it for repairs to its deck which is individually owned. Additionally, the process by which the Body Corporate resolved

to do so was flawed (resolutions were not unanimous as defined in s 2 of the 1972

Act).   Once the Tribunal had determined the levies were unlawful, because they included repairs to individually owned decks, the levies could not become lawful by the Body Corporate apportioning the costs of the repairs for the common property and decks5  and levying the applicant for its share of the costs, because the original resolution to levy for the total work, pursuant to which this apportionment was carried out, remained invalid.  The process at the second Tribunal hearing was unfair. The work carried out has been substandard and, in any event, the applicant’s deck did not need repair.  The later District Court decision upholds the applicant’s view that the levies were unlawful.6

[28]     The starting point is that it does not matter whether the Tribunal decisions were correct, nor whether the process leading to those decisions was fair.   The Tribunal’s decision was appealed to the District Court and so the applicant had its opportunity to advance its arguments in that Court as to why it was not required to pay the levies.   It was unsuccessful.  The Judge held the levies for the deck were valid as it was work incidental to the common property and, in any event, was a building element.  It does not matter that the applicant does not accept it is correct. The applicant did not appeal that decision.   It is a valid District Court judgment enforceable  against  the  applicant  (which  is  now  entered  in  this  Court  for enforcement purposes).

[29]     The applicant has not persuaded me that it would be a miscarriage of justice to allow the Body Corporate to enforce the judgment against it.  To the extent the applicant contends the work was not needed or was carried out to a poor standard, the applicant had its opportunity to advance this in the District Court.  Even now its claims are more in the nature of assertions than based on any admissible, substantial and reliable evidence before this Court. To the extent the applicant contends the later District Court decision has vindicated its position about the unlawful nature of the levies, I am not convinced.  The later District Court decision turns on the validity of

levies for long-term maintenance funds, which are not how the levies were described

5      The common property was allocated on a unit entitlement basis and the deck on an individual basis depending on its size.

6      Body Corporate 81340 v Newland above n 4.

in  the  documents,  the Tribunal  decisions  or  the  District  Court  judgment  in  the applicant’s case.  To the extent the applicant relies on the Body Corporate making a s 74 application as vindicating its position, I am not convinced.  The applicant has not provided me with a copy of that application and explained why, if it pays the levies which are the subject of the District Court judgment against it, the applicant will be prejudiced if approval is given to this scheme.  Presumably any fair scheme will take into account payments already made by unit holders and potentially allow for re-allocation of respective shares of the total costs if appropriate.

[30]     The applicant is one of a small number of unit holders who have not paid their share of the costs.  Repairs have been completed to its unit but repairs to other units have not been completed because more funds are needed.  The applicant did not bring this application for some years after the District Court judgment against it, some years after that judgment was entered in the High Court, some months after the later District Court judgment, and some months after the s 74 application was made.

[31]     In these circumstances I see no substantial miscarriage of justice to warrant

the exercise of the Court’s powers in the manner sought.

Result

[32]     The application to set aside the judgment and for other orders or alternatively staying proceedings dated 22 September 2016 is dismissed.   Usual costs should follow  the  event.    If  any  issue  arises  about  costs,  the  parties  may  file  brief memoranda (no more than three pages each) within one month of the date of this judgment.

Mallon J